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Sir David Walker has called for an account of the contributing factors which create value in private equity-backed portfolio companies among his recommendations on transparency and disclosure released today. He said this would be an important factor in establishing the impact of an industry which is now responsible for employing 8% of the UKâs workforce.

Walker requested private equity firms and their portfolio companies to readily supply information to enable the British Private Equity and Venture Capital Association to evaluate to what extent value creation in portfolio companies is due to financial structuring, market movement and operational improvement.

The recommendations also calls on portfolio companies to publish annual reports and accounts on their websites within six months of the year-end. The criteria for such disclosure include portfolio companies taken private with an enterprise value of more than £300m (€419m), employing 1000 or more UK workers or those already in the private domain with an enterprise value in excess of £500m employing 1000 or more UK workers.

The accounts should contain information about the company’s private equity owner and the main trends driving the progress of the company in its market, according to the Walker guidelines.

Walker softened his stance on reporting by private equity firms, allowing for the option of either producing an annual review, published via its website, or “regular updating of its website”, instead of demanding a full annual review.

Walker’s recommendations have been criticised by trade unions, which have claimed their enforcement on a “comply or explain” basis would not be sufficient to entice private equity firms out of secrecy.

Some buyout houses in the UK had already said they would simply refuse to sign up to the guidelines if they deemed them unnecessarily onerous. Jon Moulton, chief executive of Alchemy Partners, said: "If the guidelines are overly nuisance-some we will not sign up. If we found them to be so we would only sign up if investors asked us to."

But Walker said there would be a reputational risk to firms which chose to ignore the voluntary guidelines.

Related

The British Private Equity and Venture Capital Association, which has been nominated by Walker to monitor private equity firms’ compliance with the recommendations, announced yesterday it has appointed Sir Mike Rake, chairman of British Telecom, to chair its monitoring and review body.